The Life and Times of a Former Academic

The Big Short

December 24, 2015

Adam McKay evidently decided to take a break from directing and co-writing Will Ferrell movies, though he’s still keeping his hand in as a co-producer. So while Ferrell was off making Daddy’s Home with his money, McKay sat down to adapt The Big Short from the book by Moneyball scribe Michael Lewis. And in doing so, he set out to pull off something most people might have called impossible: to explain what led up to the 2008 financial crisis in a way that the sort of people who watch Adam McKay movies would both pay attention to and understand.

And that’s kind of a big deal, because even if you aren’t a huge nerd you can follow this simple logic: if nobody from the big financial institutions actually bore the burden of the crash, it must have gone somewhere else. From there it’s not hard to understand that it’s the common folk who got screwed over by a system that views them as little more than chattel. And they got screwed over in a way that pundits keep saying is so complicated that even the experts can barely understand, so what chance does an average person have?

As well as Lewis’ wonky nonfiction sells, it’s not selling that much to the people who really took this one in the teeth with no idea that there’s anything kicking besides bad luck. What we need is a mainstream movie full of big mainstream stars like Christan Bale, Steve Carell, Ryan Gosling, and Brad Pitt that will bring in a mainstream audience. And once you’ve got them in their seats you need to hold their attention through the technical bits with celebrity cameos.

Now, we just got another pop-culture-soaked markets-run-amok flick two years ago from no less than Martin Scorsese. Am I saying that McKay is the better filmmaker? not in the slightest. But while The Wolf of Wall Street stuck with Jordan Belfort’s dismissive attitude towards the audience, The Big Short fundamentally wants us to understand how the con worked. Belfort would interrupt his explanations, telling us we don’t care about any of that mumbo-jumbo and get back to the debauchery. McKay tells us that we might not care but we damn well should and just to make sure we pay attention we’re going to cut to Margot Robbie in a bubble-bath to explain it.

I went into The Big Short already familiar with the contours of these ideas, because that’s just the sort of system-analyzing nerd that I am. Still, I’m impressed at how clearly and concisely they explain the three things that really brought the whole house down: the Collateralized Debt Obligations (CDOs) that assembled crappy investments into piles of crap packed in “Almost All Not Crap!” investment boxes; the Credit Default Swap (CDS) investments that allowed people to bet on the fates of the CDOs; and the unregulated derivative market of trading in CDSs and even more abstract forms of side-bets that made this whole thing an even worse idea.

Along the way we also learn about some of the structures that allowed all this to go on as long as it did. Like the three credit ratings agencies that say how risky a given investment product is. Except not only do they compete with each other, they get paid by the banks issuing the products. Imagine a class with three graders, and each student can choose which one to pay to grade their exam. What sort of grades do you think they’ll end up giving? And now imagine that your life savings is in the hands of one of those students; how careful about risk do you think they really are?

You may not have paid close attention to what all the finance and policy pundits were talking about over the last few years, but The Big Short is just the engaging sort of primer you need to get up to speed on what happened and why you should be very, very angry.

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Historically, mainstream audiences don’t go for Movies that stray that far from the mainstream, especially in form. Look what happened with the recent commercial flop of Jobs. Do you think this will be any different?